Promising Signs for IP Protection in China
Any news covering Intellectual Property and China is typically fraught with stories about IP-theft and trademark violations. It can cover anything from fake milk powder, to Alibaba being ousted from the prestigious International AntiCounterfeiting Coalition (IACC), to a man named Wang who bought 1 million RMB worth of fakes on Singles' Day.
But behind the easy clickbait headlines about Chinese fakes, there is a growing trend that is likely to improve IP protection and enforcement in China. Chinese are filing for their own patents at a rate never seen before, anywhere. Last year, China became the first country to ever file more than a million patents over a 12 month period - close to double that of the US.
With China getting more of their own IP to protect, and Beijing doing what it can to encourage innovation to transition to a higher value economy, it has much more incentive to police counterfeits and copycats. As much as two thirds of the world's fakes have been estimated to originate from China, so there is some work to do.
Growing IP protection in China is good news for foreign brands, although it's further evidence that Chinese businesses are increasingly aiming to compete on more than just price.
At this stage, virtually all competition from Chinese brands will come in their home market. While we hear a lot about companies like Huawei, Haier and Ctrip aggressively expanding abroad, it would appear that most Chinese players only have China in their sights. China organisations filed just 42,154 overseas applications, less than a fifth of the 237,961 from the US, and a small part of Japan's 195,446 and Germany's 101,892.
Increasing patent filings are a key ingredient to build China into a true global player, but another contributing factor, entrepreneurialism, still appears to be lacking. It is moving in the right direction nevertheless.
One category that Chinese innovation is unlikely to challenge is outbound tourism. For our Shanghai-based readers, China Skinny's Andrew Atkinson will be speaking tomorrow morning (Thursday) about the changing face of the Chinese tourist, and what you need to know to reach them. More info here.
Here are this week's news and highlights for China:
Chinese Consumers
Global Patent Applications Rose to 2.9 Million in 2015 on Strong Growth From China: China became the first country to ever apply for over 1 million patents in a year in 2015, filing 1,010,406 patents, with the China Patent Office recording 19% growth year on year. The US was runner up, filing 589,410, Japan 318,721 and the Republic of Korea 213,694.
China Has a Long Way to Go Before Catching Up With America In Entrepreneurship: China's entrepreneurship ranking is 48th in the world, a good rise from 61st two years ago, but still a long way behind the US, Switzerland, Canada, Sweden, Denmark, Iceland, Australia and the UK who took the top spots. China fares better in attracting talent - ranking 22nd globally, but it falls to 33rd for retaining talent. The US is 5th for attracting and 2nd for retaining talent.
China’s Post-90s Workers: The Job-Hopping Generation: Only 40% of China’s post-90s graduates stay in their job for longer than 2 years. Some media even reports cases of twenty-somethings resigning because "the weather is too cold." China’s post-90s generation is a job-hopping one, that chooses personal freedom over financial security. 8% of post-1990ers have had four or more different jobs within 3 years.
China Bans Korean Drama, Movies, and Variety Shows 'in Retaliation Against Thaad Deployment': China will not grant any more approvals for programs featuring South Korean stars due to the Republic's defense missile roll-out. It is another example of China overtly pulling trade levers for politics. Smartphone maker Vivo has replaced its brand ambassador Korean actor Song Joong-ki with Taiwanese actor Eddie Peng as a result of the ban.
What Does a Fried Chicken Restaurant Have to do With Prostitution? China Wants to Know: A fried chicken fast-food chain called Call a Chick is currently under investigation in Shanghai as its advertisements, slogan, and menu are suspected of breaking China’s advertising law which specifies that advertisements “hindering societal public order or violating good social conduct” and “containing pornographic, sexual, superstitious, terrorist or violent contents” are forbidden.
Digital China
Fakes Hunter Spends Nearly 1 Million on Singles’ Day Shopping: Wang Hai is one of China’s fake goods hunters — people who deliberately buy counterfeit products and then claim back compensation from the companies who make them. On Singles' Day Wang spent close to ¥1 million ($145,000) on bulk purchases of suspected fake products, mainly food, so that he could claim compensation of up to ¥10 million.
Three Myths of China Technology Transfers: Commonly believed myths for Western businesses doing technology transfers with Chinese businesses - Myth One: The Chinese company will not breach our technology licensing agreement because it needs us; Myth Two: The Chinese company is acting this way because it is inexperienced or incompetent, not because it plans to breach; Myth Three: The Chinese company will not breach this technology transfer agreement because it takes a long view of business and it will not want to sour relations for the future.
China’s Connected Consumers 2016: 61% of Chinese shoppers search online for a review before making a purchase versus 39% in the US according to KPMG. Globally, 31% write online reviews about their purchases, versus 52% in China - 54% of them doing it on the seller's website, 39% on WeChat and 19% on Weibo. 31% buy something online because they saw it in a physical shop, up from 24% last year.
Chinese Tourists
Skyscanner Sold to China's Ctrip in £1.4bn Deal: Ctrip has its sights set on global domination shelling out $1.75 billion to buy Edinburgh-based travel price comparer Skyscanner. Skyscanner will continue to be managed separately according to Ctrip.
As the US and Europe Crack Down on Home-Sharing, Airbnb Turns to China: With a valuation of $30 billion in August, Airbnb looks to hedge potential regulatory backlash in the US and Europe. It is buying Xiaozhu, China's second-biggest alternative lodging player with 100,000 listings. Airbnb also plans to double its spending on China in 2017, and says it will expand its staff of 30 local employees to more than 300 over the next 24 months.
Chinese Knowledge of Australian Wine Boosting Tourist Numbers, Winemakers Say: Australia's wine exports to China surged 51% in the 12-months to September 2016, which is helping drive tourists as well. Winemakers in Victoria's Yarra Valley have been watching annual Asian tourist numbers grow by nearly 10% for the last three years, with growth especially noticeable over the last six months.
Food & Beverage
Domestic Beers in China Face Headwinds While Imported Beers Soar: While domestic beers have seen declines over the past two years in the world's largest beer market, China has imported 41% more beer this year, worth about $575 million.
Benefits of China Trade Agreement Lost on Australian Farmers Still Waiting for Market Access: Almost 12 months since the China Australia Free Trade Agreement came into force, producers are frustrated that many non-tariff barriers such as biosecurity protocols still block exports to the enormous market. Nevertheless, plenty of primary products have seen strong growth such as citrus exports growing 50% in the past year, mangoes more than doubling and nuts going strong.
Cars
Daimler Looks into Employee’s Incident of Insulting Chinese: President of Daimler Trucks and Buses (China) lost his temper over a parking spot in Beijing screaming: “I am in China one year already. The first thing I learned here is that all you Chinese are b*****ds.” He was also alleged to have pepper-sprayed an onlooker who tried to intervene. Thankfully he has been removed of his position.
VW Gears Up Car-Sharing Moves: Volkswagen Group China has signed a strategic cooperation framework with Didi Chuxing to meet the rapidly-changing travel needs of Chinese consumers. The two companies will establish a ride-hailing business and exchange business practices and strategies in products, marketing, branding and data technology. Didi provides services to more than 300 million users in more than 400 Chinese cities. China's car-sharing market is estimated to be worth ¥1.8 trillion ($261 billion) by the end of 2018, over 2% of China's projected GDP.
That's the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.
